Expert: Dick Dennis - 9/27/2010

Question
QUESTION: My sister & I jointly own a house (estimated value $65-75,000) that has been rented since '93 for $650.  She is pressuring me to buy her 1/2 interest out, or sell.  I want to keep renting it, do some updates/repairs.  She is getting an "as is" appraisal.  Buying her ownership at 1/2 appraisal price would put a financial bind on me.  She is 82; I'm 64.  It's a depressed market but the house still has good income-producing value. I am feeling bull-nosed, and I say wait, do some repairs, rent a little longer.  There should be some negotiation tactics for me if she wants out so badly.  Advisors say you would never pay half the appraised value b/c you don't know what it would bring on the market.  What can I do to benefit myself and please her in this impasse?

ANSWER: You could have her finance it for you, Barbara. This way it helps you with your financial bind. Let's use the $70,000 as the settled-upon value. That means you and her have $35,000 each.

She would deed her half of the property to you and you would pay her, say, $200 per month, amortized at 5˝% over 30 years, but due and payable in three years (in consideration of her age). At the end of 3 years, you would owe her $33,454. You can go get a loan from a bank and pay her off at that time . . . or you can arrange to sell the property and you can both keep your shares.

If you can afford it, the monthly payment would be $1,056.86 and you would owe nothing at the end of 3 years. Over 62 months would be the rent you collect each month. So, you can see there are several different ways to do it.

Or, you can go to a bank today and see how they would finance it for you. This way she can get her cash and you can keep the house (let her pay for the costs). By the way, you have been very generous to accept the same rent for 17 years. Must be a relative or a boyfriend. But seriously, you should compare rents in the area and see how much of a rent you should be getting. If you are not in a position to manage the property, then you should sell the property.

You may want to go to a local real estate attorney to make sure your interests are protected. Again, maybe she should pay the costs. I do wish you well.

Dick Dennis
dixiedee13@aol.com



---------- FOLLOW-UP ----------

QUESTION: Thanks so much for your detailed answer.  Don't think my sister would finance it, as I think she and her family are wanting to get "affairs" in order.  I still think I'm being pushed into corner to sell it in an as-is condition as she doesn't want to expend her part on repairs to ready it for sale, thus decreasing its potential market value.  The property has no mtg., and I feel like I am becoming the damaged 1/2 owner under these circumstances.  Again, my main question is:  Is there a way to negotiate for less than half the appraisal price (distress sale) if I were to buy her 1/2 part?
Thanks again.  

Answer
Assuming you could qualify for a mortgage for 50% of the value of the property (the bank would send their own appraiser to validate the value of the property), your only choice would be to get a new loan with a bank.

If you are looking to gain more by paying less for your half of the property, you very simply make a legitimate offer to purchase for whatever price you deem as proper. You most likely would need a real estate attorney to handle the transaction for you. Or, you might be able to find a very knowledgeable Realtor to do the deal for you.

Sister or no sister, this would be a regular transaction with EVERYTHING agreed upon in writing. That's why you want a real estate attorney or Realtor to handle this for you. They would be working strictly from your side of the table.

I get the impression it is her side of the family that is pushing this along rather than her. They may feel she is getting near the end of her days and then it would be a lots more expensive deal working with probate and/or any other unseen costs before they happen. All the more reason why you should get the attorney to start working for you. And you dictate just what you want out of the transaction. Trouble is, attorneys begat more attorneys. But you can't help it. One way or another you are going to have attorney fees. Even if you had a good Realtor, you would still want an attorney to work for your interests ONLY. Be well.

Dick Dennis